Will You Still Love Us Tomorrow?

Takeaways

A Polish diplomat friend has an important question to ask over lunch. He is nervous about his country’s economic future.

Despite Poland’s impressive transformation, unemployment is just under 20%. That is a high number — considering that Polish trade unions successfully liberated the country from the yoke of communism back in 1989.

My friend is concerned about whether foreign companies — especially German ones — will continue to invest in Poland the same way they have done in recent years.

Undoubtedly, these sizable investments were more than just a confidence booster. They provide value-added employment — and eventually a definite increase in the standard of living.

So far, so good, he says. But what if, he asks, the Germans decide overnight to withdraw all of that investment? Poland is a weak country, he reasons, with a budding economy, but not an established one, while Germany is big and strong, despite some difficulties at present.

Obviously, even though my friend is a relatively young man, some dark memories — deeply engraved in his collective national code — are flying through his mind.

The Germans have “stuck” it to the Poles before, and badly. No wonder that he is looking for some kind of reassurance that history will not repeat itself — as good and harmonious as relations between the two neighbors are looking for now.

In order to help him out of his quandary, I asked him what he studied at university. “Political science and law,” he says. “See, that’s what I thought,” I tell him. “Why do you say that?,” he asks.

“Well, because I really think you’ve got things backwards. You seem to believe that it is German companies which, for some more or less irrational reason — or out of benevolence — are being nice to Poland and its workforce.

“In your mind, the Germans are doing the Poles a favor — by throwing some good jobs their way. But that’s not at all how the economics of the situation works,” I said.

I continued: “Don’t believe that in business anybody necessarily does anything out of the goodness of their heart. Just factor in self-interest.”

“But even then, Poland would still come out on top. Why? Because German companies are not there because of an irrational love for Poland — or to make up for some injustices of the past. They have invested in Poland because that helps them, not so much Poland, to get out of their predicament.

“You know that it is expensive to produce things in Germany. That is why German companies have moved aggressively into your country.

“Basing part of the production in Poland helps them improve their cost ratios at home. In other words, by mixing workers in Poland into their pricing formula, they can afford to keep more of the costly German labor force employed.

So, the question you really ought to ask is not: How much longer will the Germans be nice to the Poles? The right question is this: Do they have any other choice? In my view, it is far less the survival of the Polish economy that is threatened than that of Germany.”

Arms control expert that my friend is — and having worked, among other projects, on Poland’s accession to NATO — I had rarely seen him happier than when he thought through the argument I had presented him with.

Somewhere deep down, against his initial instincts, he seemed to realize that, in the world of economics, there can be a deep sense of justice.